Tax increases are not the only way to grow government revenue.
Too many politicians seem to think otherwise.
To rein in government’s ability to increase taxes, fees and charges, California voters have enacted major taxpayer protections through state ballot measures, including Proposition 218 in 1996 and Proposition 26 in 2010.
In 1996, Proposition 218, the Right to Vote on Taxes Act, closed significant loopholes that had been abused by local governments to raise taxes. Proposition 218 required voter approval anytime a local government imposes, extends or increases a tax. Under Proposition 218, “General taxes,” i.e., those whose revenue is deposited to the general fund, require a simple majority vote to pass, while special taxes, i.e., those with a dedicated purpose like roads, libraries, or public safety, require a two-thirds voter approval.
Voters later approved Proposition 26, the Stop Hidden Taxes initiative, in 2010. Proposition 26 closed a loophole that allowed politicians to raise taxes by labeling them as “fees” and then passing them with a mere 50 percent majority, or, as was the case for many local tax increases, without a public vote.
Three recent court decisions have gutted the taxpayer protections enacted by voters under Proposition 218 and Proposition 26 and created loopholes that make it not only easier for politicians to raise our taxes, but also easier to divert tax dollars away from their intended uses.
Fortunately, a coalition has formed to restore the important taxpayer protections undone by these court decisions and increase government accountability.
Californians for Accountability and Transparency in Government Spending are the proponents of the Tax Fairness, Transparency and Accountability Act of 2018. The Tax Fairness Act, which looks like it will appear on the November 2018 ballot, has two primary vehicles through which it increases transparency and accountability.
At the state level, it would require new regulations that include a tax, fee or charge to return to the Legislature for a two-thirds majority vote.
At the local level, it would require city officials to explicitly state how new tax revenue would be spent and make the use of those funds legally enforceable. These requirements would make all local taxes special taxes, subject to the two-thirds vote required under Prop 218.
The act would only apply to local tax measures passed on or after January 1, 2018, and it exempts both charges for specific government services or products. The Tax Fairness Act would also require that charges not exceed the actual cost of the governmental activity.
The Tax Fairness Act affects neither the laws requiring a 55-percent majority to pass local school construction bonds nor the two-thirds requirement for taxes that help fund schools.
If a local government needs additional revenue for a specific project or purpose, it will continue to have the ability to ask voters to tax themselves for such a purpose, so long as two-thirds of them agree.
Governments need funding to build and maintain roads, keep our parks clean, and fund law enforcement and public safety. There are times when special tax increases make sense. Our school districts need funding to build new campuses and renovate existing ones. And, transportation sales taxes can provide local governments with cash vitally needed to maintain and improve their roads and highways.
Sadly, politicians have used worthy causes, including improving services like police and fire, as a ruse to bait voters into approving general tax increases whose revenue is used for other purposes.
Which brings us to a matter of local concern.
Over the past year, the City of Bakersfield has discussed the possibility of enacting a one-cent sales tax increase that would generate around $50 million per year in revenue. Revenue the city sorely needs.
According to polling research, about 65 percent of voters in Bakersfield support the proposed general tax. Voters want to enhance public services and improve response times to crime.
Bakersfield’s proposed general tax increase has been billed as the panacea to all of these and more. It’s the “and more” that has me worried.
The City of Bakersfield is projected to have a $16 million revenue shortfall as soon as 2022-23 due to spiraling pension costs.
The general tax currently proposed by the City of Bakersfield has zero protections to guarantee that revenues generated from it would be used to fight crime and address homelessness.
Rather, as the soaring costs of pension debt gobble up a larger share of the City’s revenue, a general tax would only maintain existing levels of service while a greater share of existing taxpayer dollars go to servicing pension debt.
As City Councilman Ken Weir said, “it’s a disservice to our voters to go out and tell them that we’re going to raise $50 million dollars and it’s all going to public safety. A substantial portion… would have to be dedicated to take care of the CalPERS liability.”
This is why we need to rally to get the Tax Fairness Act on the ballot.
If local governments, like the City of Bakersfield, need to meet a specific need, then take a special tax to the voters.
Bakersfield already had nearly the two-thirds majority needed to pass a special tax. There’s no reason why a well-funded and well-organized campaign for roads or public safety tax couldn’t get there.
My hope is that Bakersfield’s elected officials don’t attempt to fleece their voters with a general tax increase.
Taxpayers deserve transparency and accountability.
Contributing columnist Justin Salters writes weekly on politics and current events; the views expressed are his own. Reach him on Twitter @justinsalters or email him your thoughts: firstname.lastname@example.org.